Narrative and Instructions

Rockford Corporation is a wholesale plumbing supply distributor. The corporation was organized

in 1981, under the laws of the State of Illinois, with an authorized capitalization of 10,000 shares

of no-par common stock with a stated value of $30 per share. The common stock is sold over the

the counter in the local area. You have been hired as of Thursday, December 25, 2014, to replace the

controller, who has resigned. As controller, you are responsible for the corporation's accounting

recrods, preparation of the financial statements, safeguarding the corporate assets, and providing

management with financial information to set prices and to monitor and control operations.

Rockford Corporation closes its books annually on December 31 but prepares financial statements

quarterly. Adjusting entries are posted to the general ledger only at year-end; at the end of the

first, second, and third quarter the adjustments are entered only on a work sheet, not in the general

ledger. Therefore, the adjusting entries to be recorded on December 31 are annual adjustments that

you must journalize and the post to the general ledger accounts before preparing the financial

statements.

Rockford Corporation maintains a perpetual inventory system and takes a physical count each year

to adjust the inventory carrying amount. Purchases are recorded at the gross amount (discounts

taken are recognized at the date of payment) of the supplier's invoice, and the terms vary with

each supplier. Sales on account are subject to terms of 2/10, n/30. Discounts are taken and granted

only when the terms are met. The cost of all inventory sold in December was 80% of the sales price.

The corporation uses the following journals and ledgers:

Journals

1. A sales journal (S) - to record sales of merchandise on account.

2. A purchase journal (P)- to record purchases of merchandise on account.

3. A cash receipts journal (CR) - to record all cash receipts.

4. A cash disbursements journal (CD) - to record all cash payments.

5. A general journal (J) - to record all transacitons that cannot be recorded in the other journals.

Ledgers

1. A general ledger

2. An accounts receivable subsidiary ledger.

3. An accounts payable subsidiary ledger.

In recording sales transactions, each sale should be posted on the day of the sale directly to the

customer's account in the subsidiary ledger, using the invoice number as the posting reference

number in the subsidiary account. Also, cash receipts from customers should be posted to the

subsidiary ledger on the day they are received. The purchase order number should be used as

the posting reference number in the subsidiary ledger for purchases on account from suppliers.

Purchases from suppliers and payments to them should be posted daily. All other individual posting

may be made weekly or at the month-end. Account numbers should be used as posting reference

numbers in the journals. Officers and office personnel are salaried employees and are paid monthly

on the last day of each month. The delivery truck drivers and warehouse employees are hourly wage

employees and are paid biweekly. Each biweekly pay period ends Friday. On the following Monday

you assistants provide you with a payroll summary from which you prepare general journal entries

to record the biweekly payroll and the employer's taxes on the payroll. The biweekly employees'

paychecks are distributed on the following day (Tuesday).

The January 1, 2014, balances appear in the general ledger accounts as well as the Noverber 30, 2014,

balances, for those accounts whose balances have changed. All transacitons affecting the non-

current accounts from January 1, 2014, through Noverber 30, 2014, with explanations, appear in

these accounts to facilitate the preparation of the statement of cash flows.

Subsidiary ledger account balances as of Noverber 30, 2014, are as follows:

Accounts Receivable

Acct No

Amount

Boecker Builders

117

62,920

The Potts Company

122

50,300

Swanson Brothers Contruction

133

24,050

A & B Hardware

143

-

Trudy's Plumbing

155

15,100

Coconino Contractors Inc

160

27,800

Rankin Plumbing Corp

166

74,350

Beverly's Building Products

175

14,000

Bilder Construction Co

180

45,200

Iwanaga Plumbing and Heating

190

3,700

Total

317,420

Accounts Payable

Acct No

Amount

Phoenix Plastics

14

17,450

Business Basics Inc

16

-

Edward's Plumbing Suppliers

18

20,050

DeKalb Transport

20

-

Oxenford Copperworks

35

26,400

Smith Pipe Co

39

38,100

Ron & Rod's Plumbing Products

44

14,850

Khatan Steel Corp

57

10,000

Total

126,850

The transactions through December 23 have already been recorded by the former controller. You

are to begin your work by entering the transaction of December 25 for the payment of cash to

repurchase stock.

Dec-14

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December Transactions

December

1

Received a check in the amount of $23,569 from Swanson Brothers Contruction in full

payment of invoice No. 1120 dated Novermber 26 in the amount of $24,050.

1

Sold sewer and drainage pipe to Beverly's Building Products on account, invoice No. 1201

for $13,150.

2

Purchased copper tubing and fittings from Edward's Plumbing Supplies Inc. on account,

purchase order No. 315 for $24,320, terms n/60.

2

Issued check No. 1580 for $26,400 to Oxenford Copperworks in settlement of the

balance owned on purchase order No. 280.

3

A court notice indicates that Iwanaga Plumbing and Heating is bankrupt and payment

of its account improbable; the president orders the account to be written off as a

bad debt (invoice No. 780).

3

Sold bathroom fixtures to Bilder Construction Co on account, invoice No. 1202 for

$44,900.00

4

Received a check in the amount of $49,294 from the Potts Co in full payment of invoice

No. 1128 dated November 27 for $50,300.

4

Sold plumbing supplies and plastic pipe to Coconino Contractors Inc. on account, invoice

No. 1203 for $10,300.

4

Issued check No. 1581 for $810 to Standard Oil Co, in payment of gas, oil, and truck repair

from Tierney's Standard Service.

5

Issued check No. 1582 for $9,900 to Khatan Steel Corp. in full settlement of purchase order

No. 312 for $10,000.

5

Issued check No. 1583 for $10,486 to Phoenix Plastics in full payment of Phoenix's invoice

dated November 28 in the amount of $10,700, for purchase order No. 313, terms 2/10, n/30.

5

Received a check in the amount of $72,863 from Rankin Plumbing Corp. in full payment

of invoice No. 1129 dated November 28 for $74,350.

8

Sold cast pipe to Trudy's Plumbing on account, invoice No. 1204 for $29,300.

8

Received a check in the amount of $27,800 from Coconion Contractors, Inc. in full payment

of invoice No. 1091 dated October 20.

8

Purchased bathroom fixtures from Phoenix Plastics, on account, purchcase order No. 316

for $52,700 terms 1/10, n/30.

8

Received a check in the amount of $29,000 from Boecker Builders in partial payment of

balance outstanding covering invoice Nos. 1050 and 1071.

9

The payroll summary for the biweekly pay period ended Friday, December 5 contained the

follwing information:

Delivery and warehouse wages

4,860

FICA taxes withheld

350

Federal income taxes withheld

900

State income taxes withheld

190

Net pay

3,420

Employer's payroll taxes:

FICA tax

350

Federal unemployment tax

-

State unemployment tax

-

Issued check No. 1584 for the amount of the net pay and deposited it in the payroll bank

account. Individual payroll checks were then preppared for distributions to the biweekly

emplyees on Tuesday, December 9, 2014.

9

Issued check No. 1585 for $600 to Scooter Gordon for lettering and sign painting on some

delivery trucks.

9

Issued check No. 1586 for $6,750 to Phoenix Plastics, in payment of Phoenix's invoice dated

November 12 in the amount of $6,750, our purchase order No. 299.

10

Issued check No. 1587 for $37,719 to Smith Pipe Co in full payment of their invoice dated

November 28, terms 1/15, n/30, our purchase order No. 314.

10

Received a check in the amount of $15,100 from Trudy's Plumbing in full settlement of

invoice No. 1106 dated November 7.

10

Sold pipe, fixtures, and accessories to Trudy's Plumbing on account, invoice No. 1205 for

$28,850.00

11

Sold pumbing supplies and copper tubing to The Potts Company on account, invoice No.

1206 for $31,450.

11

Received a check in the amount of $33,920 from Boecker Builders in full payment of invoice

No. 1071.

11

Cash sales to date totaled $12,292.

12

Received a check in the amount of $28,714 from Trudy's Plumbing in payment of inoivce

No. 1204.

12

Sold plumbing fixtures and supplies to Boecker Builders, on account, invoice No. 1207

for $24,730.

15

The Potts Co returned defective copper tubing that is purchased on December 11. A credit

memo in the amount of $4,680 is issued relative to invoice No. 1206. The copper tubing

had a cost of $3,550.

15

The defective copper tubing is returned to Edward's Plumbing supplies, Inc. along with

a debit memo in the amount of $3,550 in reduction of purchase order No. 315.

15

Issud check No. 1588 for $399 in payment of November telephone bill to Northern

Illinois Communications.

16

Issued check No. 1589 in the amount of $11,360 in payment of federal withholding taxes,

$9,573, and FICA taxes, $1787, payable on November salaries and wages; The check is

remitted to the Winnebago County Bank as the depository.

16

Issued check No. 1590 for $52,173 to Phoenix Plastics, Inc, in payment of purchase order

No. 316.

17

The president informs you that Bilder Construction Co agrees to convert the $45,200

overdue account receivable (invoice No. 1120) to a 14% note due six months from today.

17

Purchased plumbing materials from Smith Pipe Company on account, purcase order No.

317 for $50,800 terms 1/15, n/60.

17

Sold drain tile, plastic pipe, and copper tubing to A & B Hardware on account, invoice No.

1208 for $7,920.

18

Sold fixtures and materials to Coconino Contractors, Inc. on account, invoice No. 1209 for

$42,780.00

18

An invoice in the amount of $1,021 was received from S. White Trucking Company for

freight on purchase order No. 317 and paid by issuing check No. 1591.

18

Received a check in the amount of $28,273 from Trudy's Plumbing in payment of invoice

No. 1205.

19

Purchased office supplies from the Pen & Pad, issuing check No. 1592 in the amount of

$1,360. (Note: Debit asset account).

19

Purchased a new Faith computer for $6,100 from Business Basics, Inc, purchase order

No, 318, paying $600 down through check No. 1593 with the balance due in thirty days

(n/30). The computer has an estmated life of five years with a salvage value of $1,300.

22

Purchased bathroom and kitchen fixtures from Phoenix Plastics, on account, purchase

order No. 319 for $48,330, terms 1/10, n/30.

22

Received a bill from DeKalb Transport for $2,300 for freight costs incurred during the last 30

days, terms n/30.

23

The payroll summary for the biweekly pay period ended Friday, December 19 contained the

follwing information:

Delivery and warehouse wages

5,770

FICA taxes withheld

415

Federal income taxes withheld

1,067

State income taxes withheld

225

Net pay

4,063

Employer's payroll taxes:

FICA tax

415

Federal unemployment tax

-

State unemployment tax

-

Issued check No. 1594 for the amount of the net pay and deposited it in the payroll bank

account. Individual payroll checks were then preppared for distributions to the biweekly

emplyees on Tuesday, December 23.

NOTE: Transactions up to this point have been recorded. At this point you became

controller and are responsible for recordign all further transactions.

25

The board of directors voted to purchase 1,000 shares of its own stock from stockholder

Dionne Schivone at $83 per share and issued check No. 1595 in payment. Stock repurchases

are recroded at cost. Rockford is purchasing these shares because Ms. Schivone had been

a valuable employee.

26

The baord of directors declared a $1.80 per share cash dividend payable on January 14, 2015 to

shareholders of record by the end of the day of December 26.

26

The president informs you that Beverly's Building Products agrees to convert the $14,000

overdue accounts receivable (invoice No. 1119) balance to a 12% note due six months from

today.

29

A half-acre parcel of land adjacent to the building is acquired in exchange for 600 shares

of unissued common stock. The land has a fair value of $54,000 and will be used

immediately as an outside storage lot and parking lot.

29

An invoice in the amount of $2,650 is received from Wayne McManus, lawyer, for legal

services involved in the acquisition of the adjacent parcel of land; check No. 1596 is issued.

29

Sold pipe and plumbing materials to Boecker Builders on account, invoice No. 1210 for

$49,040.00

30

Issued check No. 1597 in the amount of $500 to the Northern Star for adverstisement run in

the home building supplement of December 13.

30

Issued check No. 1598 in the amount of $925 to Standard Oil Co. in payment of gas, oil,

and truck repairs from Standard Oil Co. (use Freight-out).

30

Purchased copper and cast iron pipe from Oxenford Copperworks on account, purchase

order No. 320 for $63,940, terms 1/10, n/30.

30

Check No. 1599 for $15,000 is issued to the bond sinking fund trustee, Chicago Trust Co.,

for deposit in the sinking fund. (Use Other Assets).

30

Sold plumbing supplies to Swanson Brothers Construction on account, invoice No. 1211

for $24,650.

31

Received a check for $24,730 from Boecker Builders in payment of invoice No. 1207.

31

Issued check No. 1600 for $50,292 to Smith Pipe Company in payment of purchase order

No. 317.

31

The custodian of the petty cash fund submits the following receipts for reimbursement

and reports a cash-on-hand count of $8.

Postage stampls used

$38

United Parcel (freight-out)

23

C.O.D postage (freight costs)

51

Christmas office decorations

30

Check No. 1601 is issued and cashed to reimburse the fund.

31

Sold an electric truck-lift to Leila Stierman Co. for $2,500 cash. The original cost was

$7,900 with salvage value of $900, a life of 10 years, and accumulated depreciation

recorded through 11/31/13 is $4,550. The straight-line method is used. (Note: the

company follows the practice of recording a half year's depreciation in the year of

acquisition and a half year in the year of disposal.) First, bring the depreciation expense

up to date in the general journal. Then journalize the entire entry for the sale in the cash

receipts journal.

31

Sold bathroom fixtures and plumbing supplies to Trudy's Plumbing on account, invoice

No. 1212 for $55,770.

31

Because for some time the petty cash fund has been smaller than required for monthly

expenditures, the fund is increased by $75 by cashing check No. 1602 and placing the

money in the petty cash fund.

31

The payroll summary for the monthly paid employees in submitted so that December

checks can be distributed before the year-end; the details are as follows:

Office and administrative salaries

$42,900

Federal income taxes withheld

7,696

State income taxes withheld

1,517

FICA taxes withheld

3,120

Net pay

$30,567

Issued check No, 1603 for the amount of the net pay and deposited it in the payroll bank

account. Individual payroll checks were prepared for distribution to all monthly employees

by the end of the day.

Employer's payroll taxes:

FICA tax (all office and administrative)

$3,120

Federal unemployment tax

0

State unemployment tax

0

31

Cash sale since December 12 total $29,980.

Instructions

2	Post any amounts to be posted as individual amounts from journals to the general ledger
	and update the receivable and payable subsidiary ledger accounts.
	(only a few entries are posted for Dec, e.g., account receivable. Please post all other entries)